Egypt is going through a stifling financial and economic crisis that prompted it to resort to the International Monetary Fund for financing and seek to borrow from other sources, the latest of which was announced that the World Bank had provided a loan of about $ 7 billion to finance projects over the next five years.

Over the past few days, Finance Minister Mohamed Maait announced the preliminary indicators for the 2023-2024 budget, after meeting with President Abdel Fattah al-Sisi and Prime Minister Mostafa Madbouly to review these indicators before submitting them to the House of Representatives in early April, as stipulated in the constitution, which stipulates that the government submit the draft budget 90 days before the beginning of the fiscal year, as the fiscal year in Egypt begins on the first of July each year.

The minister pointed out that the expenditures will be worth 2.83 trillion pounds, an increase of 30.5% over last year's allocations, while revenues lost their value by about 2 trillion pounds, an increase of 31%, as well as Maait announced that the target percentage in GDP growth is 5%, provided that the primary surplus in the budget is 2.5% of GDP.

The minister added some detailed data for those items that are of great interest to the man in the street, as he indicated that wages will witness an increase of 15% over last year's allocations, to reach EGP 470 billion, as well as an estimated investment allocation of EGP 512 billion, and that the system of support, grants and social benefits will receive allocations of EGP 496 billion, an increase of 24% over last year.

Growth rate and absence of its positive impact

According to the Minister of Finance, the target growth rate is 5% as a percentage of GDP, but it is noted that the Egyptian government usually announces positive and high growth rates, without necessarily having a positive impact on macroeconomic indicators, and has not helped solve Egypt's economic problems.

According to data from the Ministry of Finance, the growth rate in 2021-2022 reached 6.6%, with the target rate by the end of 2022-2023 being 5.5%, in light of the deterioration of the state of the Egyptian economy in the past two years, given the weakness of the economy's structure in front of the fluctuations of external conditions, due to the Corona crisis and the Russian war on Ukraine. Hence, if this growth does not have a positive impact on economic activity, this means two things: the first is that it is done in the wrong directions, or that its returns are reaped by a limited segment of Egyptian society, and the majority of society is deprived of it.


Impact of inflation

The Central Bank of Egypt announced at the end of February inflation rates of 40%, while the Central Agency for Public Mobilization and Statistics estimated the inflation rate at 32%, which is undoubtedly high compared to the situation in the 2022-2023 budget.

Therefore, there is an increase in the value of expenditure allocations in the budget estimated at 830 billion pounds, and in terms of wages, we found an increase of 15%, which is a higher increase than what was recognized annually in previous budgets, where wage allocations annually increase only 10%.

However, this ratio of wage increases, or subsidy provisions, is not commensurate with inflation rates, which are expected to rise further, in light of the expected decline of the Egyptian pound in the coming period.

The problem of fixed income earners in Egypt remains, in light of the large gap between prices and wages, as the purchasing value of wages of workers in all sectors of the Egyptian economy is much lower than it was years ago, due to successive waves of inflation.

Raising the price of the minimum wage to EGP 3500,3 instead of EGP <>,<> does not seem sufficient in light of the increasing burdens of living and its pressure on the Egyptian family budget significantly, as basic goods are no longer available in the necessary quantities necessary for the family, due to the high prices.

Perhaps the prices of meat, poultry, fish, rice and others are the best evidence, which forces the Egyptian family to dispense with some of these goods, or reduce their needs by a large percentage.

If we consider the evaluation of expenses and revenues in dollars in the two years, we find that expenses in 2022-2023 were worth $ 109.75 billion (dollar exchange rate is 18.86 pounds), and in the 2023-2024 budget, the value of expenses in dollars is $ 94.6 billion (dollar exchange rate is 30 pounds), while revenues in 2022-2023 amounted to $ 80.43 billion, and in 2023-2024 it reaches $ 66.6 billion.

Hence, we find that the real value of spending allocations in the 2023-2024 budget is lower than in 2022-2023, and therefore its economic and social benefit to individuals will be declining, despite the announced increases in expenditure and revenue allocations in Egyptian pounds.

Burden of increasing revenue

The draft budget for 2023-2024 aims to increase public revenues by 31%, and therefore this increase will be a source of fatigue for the budget of households as well as companies, as the increase in revenues will only be from sources of mostly taxes and fees, and we have seen a few days ago the government's behavior to raise fuel prices, and may resort to raising more public goods and services before the beginning of next July.

Exacerbating the crisis of the Egyptian economy in light of the target of increasing revenues by 31%, the non-oil private sector has been suffering from a recession for years, and burdening it with any tax burdens, fees, or increases in the prices of goods and services, would increase the recession for the non-oil private sector.

By following up on the actual data for the collection of targeted revenues, it was noted that they are less than the target, for example, the data published through the Ministry of Finance on the revenue targets for the year 2020-2021, as they were at 1.288 trillion pounds, while the financial statement for the 2022-2023 budget shows that the actual revenue achievement in 2020-2021 was about 1.108 trillion pounds, meaning that there was a decline in the revenues achieved by about 180 billion pounds compared to the target in the same year.

In light of the economic crisis that Egypt is experiencing, it is feared that the target in public revenues will not be achieved, and therefore this is reflected in several things, including the government's failure to fulfill its obligations in the expenditure item, and the second thing is the possibility of increasing the deficit in the public budget, which means resorting to internal and external debts and the continuation of the public debt crisis of the Egyptian state.

The Egyptian government usually refers to its programs in the sale of public projects, as it recently announced that it may add some projects to what it announced to sell before, which is 32 public projects, whether partial or total sale.

The danger of this to the budget lies in the fact that the sale process for public projects deprives the budget of the surplus profits of those projects, which belong to the budget. According to the financial statement for the 2022-2023 budget, the estimated profits transferred to the budget from public companies were about EGP 16.1 billion.

In conclusion, the state budget is a reflective mirror of the conditions of the economy in general, and to the extent that the budget suffers from problems, the economy faces a decline in performance. The fact that the Egyptian budget is burdened with public debt for long periods, and amid the absence of a radical solution to the debt problem, it seems that solving the issues of deficit, paying the interest bill and its dominance over the rest of the budget items, or solving the problems of weak spending on education and health, is difficult at the present time.